Hemophilia A and B are congenital coagulation disorders. Hemophilia A occurs in 1 in 10,000 individuals whereas hemophilia B affects 1 in 30,000. Clinically, hemophilia is characterized by spontaneous and prolonged bleeding that can result in disability and death. Current protein replacements therapies are limited by incomplete efficacy, high cost, restricted availability, and the possible development of neutralizing antibodies against F.VIII or F.IX in chronically treated individuals. The long range goal of our lab is the development of strategies for cell transplantation, particularly to the liver. Transplanted cells with wild type genes and normal hepatocyte function, may serve as "gene vectors" for restoring function and synthesis of deficient proteins. Hemophilia is ideally suited for this approach. Gene transfer approaches to correct the single gene defects of F.VIII or F.IX have been aggressively investigated but have been frequently been limited by insufficient factor synthesis or by immune response against transgenic or viral proteins. We have developed an alternative strategy using embryonic stem (ES) cells differentiated in vitro and transplanted into hepatic parenchyma to restore wild type function and the synthesis of deficient proteins responsible for hemophilia. In a murine model, we have shown 1) that ES cells can be directly differentiated in vitro into putative endodermal precursors (PEPs) and injected into liver parenchyma resulting in robust engraftment that does not require a hepatocellular deficit or liver injury; 2) that engraftment results in long-term, mature hepatocyte function as demonstrated by persistent reversal of F.IX deficiency in a F.IX knockout mouse and; 3) that engraftment occurs across an allogeneic barrier without recipient immunosuppression. Although these findings suggest therapeutic potential of transplanted PEPs in hemophilia, significant challenges remain. The proposed investigations will address these challenges with the following specific aims: Specific Aim 1: Develop definitive strategies in vitro to separate ES derived PEPs from ES cells that lack endodermal differentiation. Specific Aim 2: Determine the potential for efficacious and safe correction of hemophilia by characterizing the in vivo functional interaction of PEP-derived clotting factors with host coagulation and immune systems. Specific Aim 3: Determine the host immune response to allogeneic PEP engraftment and the immunologic mechanism for the persistence of PEP engraftment. Our overall hypothesis is that allogeneic ES derived PEPs are capable of safe engraftment into the hepatic parenchyma, providing long-term coagulation factor synthesis in vivo and the correction of hemophilia.